With venture debt, the dilutions are much smaller and it gives start-ups good discipline says Benjamin, Genesis’ co-founder

SINGAPORE • Singapore’s Sassoon family is a retail powerhouse. As the clan who brought The Coffee Bean & Tea Leaf to Asia, they’re often credited for helping spark the craze for Western-style coffee around the region. Now, they want to foster another trend: Funding loans to start-ups.

Genesis Alternative Ventures Pte Ltd, anchored by family office Sassoon Investment Corp, plans to raise US$70 million (RM294 million) over the coming 12 months for venture-debt financing, people familiar with the matter said. Whereas venture capitalists typically buy stakes in companies via funding rounds or bonds that can convert into shares, venture debt is a subtler business. It involves lending money to early-stage firms that may struggle to borrow from a bank, with relatively lower interest charges.

“Equity is very expensive because you have to give up your shares,” said Ben Benjamin, Genesis’ co-founder and the son-in-law of Sassoon family patriarch, Victor Sassoon. With venture debt, “the dilutions are much smaller. It also gives start-ups good discipline. You learn to pay your bills, your interest, building up your credit history,” he said.

Venture debt is big in the US, where giants like Silicon Valley Bank have used it to great success. In Singapore, however, where a number of start-ups have mushroomed, almost all venture capital firms focus on equity-style investments.

Genesis believes venture debt will appeal to entrepreneurs because the venture financing doesn’t require the founders to give up as much of their companies.

Genesis’ loans will come with an attached warrant that gives it the right to a small portion of shares at a set price. So, for example, a US$1 million loan taken out this year that’s due to be repaid by 2024 may give Genesis the right to buy US$200,000 of shares at a pre-agreed valuation.

Most of the major existing venture debt firms in South-East Asia are linked to large financial institutions. InnovenCapital Pte Ltd, which raised US$200 million in additional funding this month, counts Temasek Holdings Pte Ltd and United Overseas Bank Ltd as shareholders. DBS Group Holdings Ltd started its own financing programme to tech start-ups in 2015.

Benjamin’s other co-founders — Jeremy Loh and Martin Tang — quit DBS’ venture debt business last year. The trio said an ideal borrower would be a Series B-stage business with around S$1 million (RM3.04 million) in revenue.

Genesis has backed three start-ups so far: Horangi Cyber Security, which helps companies secure their online presence; online restaurant Grain; and co-working operator GoWork. Eight more are in the pipeline, according to the company.
It’s also signed up Indonesia’s PT Bank CIMB Niaga Tbk as a strategic partner.

“In Indonesia, the families have been operating for over 50 years already,” Benjamin said. So, we have quite a bit of infrastructure, market knowledge” and CIMB Niaga has been investing in Indonesian companies, he said. — Bloomberg